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USGNN Original StoryUnderstanding Energy-Efficient Opportunities for Commercial Buildings
July 30, 2009

The commercial building tax deduction, part of the Energy Policy Act of 2005, established a tax deduction for expenses incurred for energy-efficient building expenditures made by a building owner. Limited to $1.80 per square foot of the property, the deduction provides allowances for partial deductions for improvements in certain areas, including the building envelope. The Emergency Economic Stabilization Act of 2008 (HR-1424), approved and signed last fall, extended those benefits through December 31, 2013.

Jason Aruck, project manager LEED-AP, CEM, with EMO Energy Solutions LLC, spoke to attendees of the Northeast Window and Door Association (NWDA) last week to explain the provisions of the tax deduction. The presentation, titled "Understanding the Commercial Building Tax Deduction," took place during the NWDA's summer meeting, July 20-21 at the Seaview Resort in Galloway, N.J.

Aruck explained to his audience the project types that are eligible for the deduction. These include:

  • Those complying with ASRHAE Standard 90.1-2001; low-rise residential projects (three stories or fewer) are not included;
  • Privately owned commercial buildings, which allows the building owner or the efficient property owner to earn the deduction; and
  • Federal, state or local government owned buildings where the primary designer can claim the deduction; it could also be split between multiple designers.

He added that non-profits are excluded.

When performing the building calculation, Aruck explained that these can only be done by an individual qualified to do so. This can include an individual not related to the taxpayer who is claiming the credit, or a professional engineer or contractor, though contractors are typically only involved as part of interim lighting rule calculations.

Aruck also discussed different case studies, one of which was a Holiday Inn renovation. The project included retrofitting 218 guest room windows and several common areas; total renovation space was 61,500 square feet. Aruck said all windows were replaced with new units constructed of a vinyl curtainwall system and PPG Solarban 60 glass; the new windows have a U-factor of .29. The renovation, he explained, resulted in energy cost savings of 12.4 percent and earned 60 cents/square foot ($37,000) for envelope improvements.

However, Aruck added that shell improvement credits, such as those on the Holiday Inn, are ideal for hotels and similar buildings, but may be difficult to obtain for offices, schools or other buildings that have large internal loads driving energy use.

In concluding the presentation, he shared a few final "take-home points." These included:

  • The fact that the tax deduction is not easy to obtain;
  • The technologies that obtain the deduction vary by building type, use and size; and
  • In retrofit projects new equipment will be compared to baseline equipment for new buildings, not existing equipment being replaced.

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